IMF names its price

Scofflaw

PUBLIC sector workers will have to meet savings targets within just nine months or their pay will be cut.

The new threat to wages is included in a list of stringent conditions outlined by the IMF and EU last night as the price of the €85bn bailout.

The tranches of loans to keep the country afloat will only be paid over if severe targets are met -- and to strict deadlines.

The terms of the deal clearly state that if any "shortfall" in savings from the public sector occurs, a fresh reduction in the "public service wage bill" will be considered by the end of next September.

Finance Minister Brian Lenihan said the Government had no option but to accept the terms.

Other conditions attached to the deal are:

* Every week, the Government must tell the IMF, the EU and ECB what money it is taking in and spending.
* The banks must reveal what loans they've given out every week.
* The numbers and salaries of all those working in the public sector must be disclosed every three months.
* The banks must give detailed information on deposits every month, including how long deposits will stay in the banks and whether they're from householders, companies or other banks.
* The banks must state how much debt they have falling due over the next 36 months on a monthly basis.
* Sheltered professions, including lawyers, doctors and pharmacists will face radical changes within nine months as part of a plan to drive down costs and increase growth in the services sector.
* The State will have to sell off its stakes in Irish banks "within the shortest timeframe possible".

The document goes on to spell out the need for cutbacks of €6bn in 2011, €3.6bn in 2012, and another €3.1bn in 2013.

Water charges will be introduced earlier than expected in 2012 or 2013, according to the documents. Property tax will be gradually increased on a yearly basis once it is introduced in Budget 2011.

The document also commits the Government to a radical restructuring of the banks and junior bondholders will be asked to share some of the pain.

The stringent conditions are included in an agreement signed by Finance Minister Brian Lenihan and Central Bank Governor Patrick Honohan and sent to European finance ministers, EU Commissioner Olli Rehn and IMF chief Dominique Strauss Kahn. Mr Lenihan and Mr Honohan claim the measures are "adequate", but admit further measures "may become necessary".

The demand for a weekly update on the Government's cash-flow position could stretch government departments and state agencies, many of whom only compile such information on a monthly basis now.

The Government will also introduce a new law to prevent it running up excessive budget deficits and will cap the amount of spending in each quarter.

And, much as expected:

Fine Gael and Labour -- the parties likely to form the next government -- claimed the multi-billion bailout deal has "tied their hands".

I wonder if there's any chance of us keeping some of those transparency measures, or getting the information?

Sorry: Source for the above.

The Memorandum is here.

cordially,
Scofflaw

ei.sdraob

source? more details?? thanks!

PUBLIC sector workers will have to meet savings targets within just nine months or their pay will be cut.

oh this is going to be fun, more strikes coming to your town.

The numbers and salaries of all those working in the public sector must be disclosed every three months.

yes yes yes, some sort of transparency at last, would these be published? name and shame the top earners :pac:

Sheltered professions, including lawyers, doctors and pharmacists will face radical changes within nine months as part of a plan to drive down costs and increase growth in the services sector.

good no profession should be "sheltered"

The Government will also introduce a new law to prevent it running up excessive budget deficits and will cap the amount of spending in each quarter.

wow :eek:

Scofflaw

Also, the unions:

SIPTU general president Jack O'Connor told the Irish Independent last night the trade unions would cooperate with reforms. He said it was likely that progress would be made by the time of the deadline.

However, he warned if there was a "unilateral departure" from the agreement when staff were compliant, "we'll have to respond".

I see he's gone for the popular "it's the French and German banks' fault":

"I don't think any of it is fair," he said. "How could it be fair that everybody in Ireland who had nothing to do with the cause of the collapse has to spend the next seven years paying for it just in order to rescue the French and German banks?"

It's amazing how popular ignorance is when it allows you to avoid responsibility.

cordially,
Scofflaw

Bob_Latchford

My first thought to was there are going to be strikes. Depends what the "outcomes" specified are though. Guessing the required saving will have to come from a % cut in pay rather than some sort of restructuring moving the chairs about.

Suppose IMF have been doing this for years and are wise to any flannel without "outcomes"

johnnyskeleton

ei.sdraob wrote: »

source? more details?? thanks!

http://www.independent.ie/national-news/imf-names-its-price-2444805.html

I assume.

From memorandum:

"lowering of personal income tax bands and credits to yield 945m in 2011"

Is the most striking detail IMO.

ei.sdraob wrote:

Sheltered professions, including lawyers, doctors and pharmacists will face radical changes within nine months as part of a plan to drive down costs and increase growth in the services sector.

good no profession should be "sheltered"

What the report actually says p.31:

We will promote service sector growth through vigorous action to remove remaining restrictions on trade and competition, and will propose amendments to legislation to enable the imposition of financial and other sanctions in civil law cases relating to competition.

Indo put quite a spin on that one methinks (unless I missed another part of the memorandum).

Chuchoter

What do you think they will do to doctors? I mean they can't really make the working conditions any worse for NHCDs.

ei.sdraob

johnnyskeleton wrote: »

http://www.independent.ie/national-news/imf-names-its-price-2444805.html

I assume

Thanks yeh, Scofflaw edited his post, thanks both

at last a plan that will put the country on right path, pitty about the 2 wasted years.

Bob_Latchford

crayolastereo wrote: »

What do you think they will do to doctors? I mean they can't really make the working conditions any worse for NHCDs.

Sheltered in my mind means there is restricted competition / protectionism. Private doctor could come over from Poland and compete on price etc

Welease

crayolastereo wrote: »

What do you think they will do to doctors? I mean they can't really make the working conditions any worse for NHCDs.

I assume they are talking about non-hospital GP surgeries.. and the cost to the state for providing medical card coverage, services etc (especially as they linked them to Pharmacies)

Dirk Gently

Finance Minister Brian Lenihan said the Government had no option but to accept the terms.

I'd say he was pretty much delighted to be honest. Saves the gov declaring war on the PS as now the IMF have done it for them. The tied hands brigade will also be delighted an outside organisation has done their dirty work for them.


Just a question on selling off the banks asap. I assume they will become foreign owned. Is there even the remotest possibility of tax payers getting any money back in the form of levies should these banks function and become profitable again?

Dannyboy83

This is fantastic news.
Reform at last, how long have we waited?

The Government will also introduce a new law to prevent it running up excessive budget deficits and will cap the amount of spending in each quarter.

It's the end of Fianna Fail as we know it.:cool:

BeeDI

Looks like the power and influence of the unions is past tense When the letter of the IMF law is implimented, the cosey relationship which existed between ICTU and the powers that be in government in the "Bertienomics", will be well and truely buried.

ei.sdraob

johnnyskeleton wrote: »

Indo put quite a spin on that one methinks (unless I missed another part of the memorandum).

removing barriers to trade and competition was meant to be the job of EU

now if they could remove the biggest barrier to competition called "unions" my day would be made

kmick

Scofflaw wrote: »

Also, the unions:

I see he's gone for the popular "it's the French and German banks' fault":

It's amazing how popular ignorance is when it allows you to avoid responsibility.

cordially,
Scofflaw

Scofflaw is it not the case that irregardless of the behaviour of the banks we now owe a debt to bondholders which the government have guaranteed. Irregardless of whom that debt is owed to the people of Ireland are now picking up the tab for those debts which is essentially a tansfer of funds from public to private.

johnnyskeleton

ei.sdraob wrote: »

removing barriers to trade and competition was meant to be the job of EU

now if they could remove the biggest barrier to competition called "unions" my day would be made

And the competition authority. In fact, much of what the competition authority has deemed a restrictive practice has been done away with in the legal profession but that hasn't made much of a difference except that there are now a lot more lawyers about.

zig

kmick wrote: »

Scofflaw is it not the case that irregardless of the behaviour of the banks we now owe a debt to bondholders which the government have guaranteed. Irregardless of whom that debt is owed to the people of Ireland are now picking up the tab for those debts which is essentially a tansfer of funds from public to private.

This is true, but Jack O'Connor is clearly using this fact to avoid the simple fact that there is massive inefficiency and alot of overpaid workers in the public service.

20Cent

Scofflaw wrote: »

Also, the unions:



I see he's gone for the popular "it's the French and German banks' fault":



It's amazing how popular ignorance is when it allows you to avoid responsibility.

cordially,
Scofflaw

Its true isn't it?
Even the IMF memo notes that the root of the problem is the banks.

Bob_Latchford

20Cent wrote: »

Its true isn't it?
Even the IMF memo notes that the root of the problem is the banks.

Why say French and German, first and foremost its Irish Banks. Its popularist nonsense to blame jonny foreigner

Scofflaw

From the Memorandum:

1. lowering of income tax bands and credits by 10% to yield an additional €945m in 2011 and an extra €300m in a full year

2. reduction in pension tax relief and pension related deductions

3. Social Protection expenditure reductions

4. reduction of PS employment numbers in 2011

5. reduction of existing PS pensions on a progressive basis averaging 4%

6. reduction of at least €1,800m in public capital expenditure against existing plans for 2011

7. extension of NAMA to a further €16bn of land and development loans in AIB and BOI

8. further reductions in the size of the banks

9. government to divest itself of bank participation as quickly as possible

10. minimum wage levels down by €1.00/hour

11. removal of restrictions to trade and competition in sheltered sectors - including the legal profession (implementing the recommendations of the Legal Costs Working Group), medical services (eliminating restrictions on the number of GPs qualifying) as well as restrictions on advertising and treating public patients, and the pharmacy sector - ensuring the elimination of the 50% markup under the Drugs Payment Scheme is enforced

12. looking at removing the cap on retail premises size

13. indexation of PS pensions, basis of pensions to be average career salary, new PS entrants to see a 10% pay reduction

14. banking regulation and supervision to be strengthened

15. reform of personal insolvency regime, including sole traders

16. retention of means-tested mortgage interest supplement scheme

17. agreement by AIB and BIO to provide targeted lending of €3bn each for SMEs in both 2010 and 2011

18. local government expenditure to be subject to more stringent supervision

19. enhancement of competition law

Personally, a lot of that seems to me to be a reversal of the various money-wasting policies put in place in order to buy elections over the last decade.

cordially,
Scofflaw

Permabear

This post has been deleted.

Welease

Scofflaw wrote: »

15. reform of personal insolvency regime, including sole traders

cordially,
Scofflaw

Thats an intersting one that has often been requested, but I had not seen mentioned until today...

Scofflaw

Scofflaw wrote: »

Personally, a lot of that seems to me to be a reversal of the various money-wasting policies put in place in order to buy elections over the last decade.

cordially,
Scofflaw

Yep, instead of the tax cuts etc during the boom the money should have been chanelled into long term structured projects and investments in health etc. It's just a shame we have to cover the bank issue.

Bob_Latchford

9. government to divest itself of bank participation as quickly as possible

What would be the reason for this and the timescale?

Could it be negligence? Ideology? lots of European governments have nationalised banks now.

Sleepy

Is anyone else looking on incredulous at the fact they can't find the stroke in this to enrichen FF and the union heads?

Could it actually be the start of common sense in the running of our country? :eek:

I'm actually finding it hard to believe.

Tim Robbins

"I don't think any of it is fair," he said. "How could it be fair that everybody in Ireland who had nothing to do with the cause of the collapse has to spend the next seven years paying for it just in order to rescue the French and German banks?"

What typical nonsense. Cuts in the public are necessary anyway.

dan_d

Christ.

Every week they have to report to the ECB????:eek:

Wow. They must have really seen things they didn't like in there.

Most of this I applaud - particularly if they are going to have an impact on private health services, ie local doctors, cost of drugs, that kind of thing.

But I don't know about property tax increasing over the next 4 years.....

There's no 2 ways, this will hit people very,very hard over the next 2 years in particular, including those who've already taken the hits and are already struggling (and by that I don't mean highly paid civil servants or long term dole claimers.)

Thankfully though, it does break the stranglehold of the unions.It's also a nice little set up for FG and Labour - no matter what is said to them on the doorsteps, they can throw back "but FF agreed this" in reponse.

I wonder how DR. James Reilly will feel about the targeting of private health...as a private practitioner himself??

Scofflaw

20Cent wrote: »

Its true isn't it?
Even the IMF memo notes that the root of the problem is the banks.

The fragility of the Irish banks results from their reliance on Irish property loans as assets, with those asset values being based on bubble prices. Were the banks' asset bases not fragile, and thus their viability in doubt, their ability to roll over their debts would not be an issue, because they would be able to borrow on the markets in the usual way.

AIB and BOI between them handle 70% of the financial transactions in Ireland - if they ceased to trade, they would freeze that much of our economy for an unknown period while their affairs were wound up. The ECB and the foreign banks could absorb the shock, and we could not - the German and UK banks have much less exposure to our banks than is regularly claimed - €30bn in the case of German banks, largely hedged, and with no more than €4-500m for any given bank. The ECB holds a lot of Irish bank debt because that's the mechanism that keeps Irish banks from going under while they're pared down to a size that the Irish state can cope with on its own.

To reiterate the important point there - the Irish banks aren't fragile because of their loans, they're fragile because of their assets, which aren't - or weren't - as large as they had claimed them to be. And that, in turn, is the result of the failure of the Irish government to ensure any adequate supervision or regulation of the Irish banking sector over the last decade - which, itself, is because the government had shifted the tax base of the country heavily onto the property market in order to move people out of the income tax net to buy elections. That gave the government a vested interest in allowing the banks to grow far bigger than any reasonable valuation of their assets would have allowed, by not insisting on any such reasonable valuation.

The plan contains a continued commitment to paring down the size of the Irish state-owned banks by winding up positions held by the banks and crossing off the assets against the liabilities, a process which is already very much under way. AIB has shrunk from having liabilities of €97bn and assets of (nominally) €101bn at end 2008 to liabilities of €81bn and assets (slightly more firmly) of €85bn at end 2009. With NAMA being extended to take another €16bn out of AIB/BOI, those figures will shrink yet faster - so we might even see the banks re-entering a zone of normality at a size the Irish state can cope with by 2012. I'd say that the size Ireland can cope with is maybe in the €40bn region for each bank, but that's pure gut feeling.

That's why Jack O'Connor's statement is false - we're bailing out the Irish banks because we need the Irish banks, not because anyone else does. His members need those banks, and so does Jack O'Connor, because without them nobody will get their salaries.

cordially,
Scofflaw

Bullseye1

No 12 is interesting. Why would they get involved in planning restrictions?

Permabear

This post has been deleted.

Tim Robbins

Bullseye1 wrote: »

No 12 is interesting. Why would they get involved in planning restrictions?

Good question.
My understanding is IMF try to open economies and bring down trade barriers.

Bob_Latchford

Bullseye1 wrote: »

No 12 is interesting. Why would they get involved in planning restrictions?

Again its competition I think, larger stores, lower margins, cheaper goods
Its going to change Ireland. In a lot of ways. Some of the big continental ones are MASSIVE but dirt cheap

dan_d

Thanks for the list Scofflaw.

Can someone explain points 15 & 16 to me in short language? I'm a bit unsure on what they mean.

leeroybrown

Bullseye1 wrote: »

No 12 is interesting. Why would they get involved in planning restrictions?

Competition. The 3500 sqm restriction on retail stores prevents the larger low-cost retail players from entering and competing our market. I think the only notable exception we've ever made to the restriction is IKEA who wouldn't have come unless they got the 25000+ sqm they have.

Slozer

Scofflaw wrote: »

* The State will have to sell off its stakes in Irish banks "within the shortest timeframe possible".

Let me get this straight!

We have just spent billions bailing out banks, transfered all their bad loans to NAMA. So basically cleared the banks balance sheets and now were going to sell these state owned profit making organisations void of bad debts to coporates such as JP Morgan and Goldman Sachs!

"There is something rotten in the state of Denmark"

Anyway Im not suprised as I knew this would happen.

kmick

Scofflaw wrote: »

To reiterate the important point there - the Irish banks aren't fragile because of their loans, they're fragile because of their assets
Scofflaw

Banks are mainly two things deposits/bonds held and loans to external parties. However a loan (however bad it is) is considered an asset on the banks books. Deposits and Bonds are in essence their liabilities.

Scofflaw wrote: »

With NAMA being extended to take another €16bn out of AIB/BOI, those figures will shrink yet faster - so we might even see the banks re-entering a zone of normality at a size the Irish state can cope with by 2012. I'd say that the size Ireland can cope with is maybe in the €40bn region for each bank, but that's pure gut feeling.
Scofflaw

That does not take into account the drip drip flight of deposits. This will accelerate as we move toward the end of the bank gaurantee.

Bob_Latchford

dan_d wrote: »

Thanks for the list Scofflaw.

Can someone explain points 15 & 16 to me in short language? I'm a bit unsure on what they mean.

Think it recognition of the mortgage debt issue that will come along in future. If you cant pay you go bankrupt, but relief is there if its you home and not an income

Scofflaw

dan_d wrote: »

Thanks for the list Scofflaw.

Can someone explain points 15 & 16 to me in short language? I'm a bit unsure on what they mean.

15. reforming personal bankruptcy laws to make the process faster and cheaper, but without generating undue moral hazard (ie without making it so attractive an option that people will happily run up large debts and then declare themselves bankrupt). Like divorce settlements, there will now be a 'mediated' option rather than creditors having to go through the courts.

16. keeping a scheme that allows for temporary assistance to distressed mortgage holders, but tightening it up and focusing it towards the most distressed.

There's obviously a bit of fudge room in the latter, although given the stringent supervision this whole plan is subject to, not as much as there otherwise would have been.

I see that "forced burden sharing" for bank sub debt holders is very much on the cards - "forced burden sharing through legislation is possible and legislation is currently being prepared in this regard".

cordially,
Scofflaw

Sleepy

donegalfella wrote: »

This post has been deleted.

I know. It's just hard to accept that for the first time in my adult life I'm hearing of policies being pursued that make sense to me!

Robxxx7

Bob_Latchford wrote: »

Again its competition I think, larger stores, lower margins, cheaper goods
Its going to change Ireland. In a lot of ways. Some of the big continental ones are MASSIVE but dirt cheap

It will probably open the door to more out of town shopping areas and will no doubt be the death blow to your local high street as we know it

Scofflaw

kmick wrote: »

To reiterate the important point there - the Irish banks aren't fragile because of their loans, they're fragile because of their assets

Banks are mainly two things deposits/bonds held and loans to external parties. However a loan (however bad it is) is considered an asset on the banks books. Deposits and Bonds are in essence their liabilities.

Sorry, that was unclear - "loans" there is the loans to the Irish banks, not by the Irish banks.

kmick wrote: »

That does not take into account the drip drip flight of deposits. This will accelerate as we move toward the end of the bank gaurantee.

Yes - given that the standard deposit guarantee of €100k (as opposed to the government's blanket all-debt guarantee) covers something like 93% of deposits, that process will reduce the banks fairly strongly towards being domestic deposit-holding banks. Similar in a sense to what Iceland did, but through a more 'organic' mechanism, if you like.

cordially,
Scofflaw

Atilathehun

Within a year or two, there will be a lot of union chiefs who will be completely irrelevent on the new economic landscape. They have had the ears of government up to now, sit on boards of a bucketful of quangos, and other soon to be demolished institutions.
I suppose Gilmore will have to set up some sort of retirement home for the lot of them. A NAMA for union chiefs I guess.

Scofflaw

Robxxx7 wrote: »

It will probably open the door to more out of town shopping areas and will no doubt be the death blow to your local high street as we know it

That's true, and it's not a measure I'm happy with for exactly that reason. It's a rather doctrinal position - that the very large out of town stores provide more 'economic efficiency' (more goods shifted per unit of labour, and lower costs), and are therefore a good thing, even though the tradeoff is the reduction of the high street to boutique and niche shops, with a corresponding increase in car use and a corresponding drop in locally based employment.

cordially,
Scofflaw

dan_d

Robxxx7 wrote: »

It will probably open the door to more out of town shopping areas and will no doubt be the death blow to your local high street as we know it

Why?

These exist by the multiple throughout France. Hypermarches, Carrefours, Decathlons....etc.One off stores.

But the local high street is still there - the butcher, the veg seller, the fishmonger, the small boutique shops etc.

No reason it can't work here.

ei.sdraob

Scofflaw wrote: »

12. looking at removing the cap on retail premises size

Wallmart pretty please!

anyone who ever was to US knows how huge and cheap this shop is due to the economies of scale. If wallmart sets up shop here it would be good news for everyone especially people with tight budgets.

the closest we get scale wise is Ikea

Amhran Nua

Scofflaw wrote: »

That's true, and it's not a measure I'm happy with for exactly that reason.

It does say "look at", so I don't think its written in stone. The city centres of Ireland are quite medieval in character anyway, so it was only a matter of time before some sort of restructuring took place to account for the fact that they are unable to handle modern population sizes.

Overall most of these are good, I'd be quite happy with them, especially sole trader enterprise insolvency reform and SME investment (both growth stimulus measures), although I'd be a lot happier if they hadn't inflicted a punitive interest rate on the "bailout" to the country with the other hand, which threatens to eat up any savings these reforms create.

ei.sdraob

Bob_Latchford wrote: »

What would be the reason for this and the timescale?

Could it be negligence? Ideology? lots of European governments have nationalised banks now.

Lets assume in 10 years time we are back to normal growth, in this climate a nationalised bank would be dangerous to the economy

since politicians could put pressure on the nationalised bank to lend to their constituents at unsustainable rates or terms (100+% mortgage etc)

Bob_Latchford

Its opening of the market and giving people choice. The thing is people will choose on direct price comparison rather than anything secondary. The distinctive flavour of an Irish high street will be under pressure for sure.

Wether the local butcher survives will depend on how good they are at business rather than butchery

Bob_Latchford

ei.sdraob wrote: »

Lets assume in 10 years time we are back to normal growth, in this climate a nationalised bank would be dangerous to the economy

since politicians could put pressure on the nationalised bank to lend to their constituents at unsustainable rates or terms (100+% mortgage etc)

Maybe I was thinking "soon as possible" was "firesale" they are still worth something, dont think we should accept first offer that comes along. But within 10yrs I can understand

RichardAnd

The point about reducing PS employment numbers caught my eye. Is there any information on how this will be done? That it to say, will we see compulsory redundancies or rather, and more likely in my opinion, voluntary redundancy as was seen in the HSE.Just a note on compulsory lay offs in the PS. If they came to pass, how would it be decided who would go? In an ideal world, this would be the wasters but finding enough of them to meet the butcher's bill wouldn't be easy. Would it be a case is "last in first out" or rather, a fire and re-hire approach?

zig

RichardAnd wrote: »

In an ideal world, this would be the wasters but finding enough of them to meet the butcher's bill wouldn't be easy. Would it be a case is "last in first out" or rather, a fire and re-hire approach?

I find this hard to believe

Amhran Nua

RichardAnd wrote: »

Just a note on compulsory lay offs in the PS. If they came to pass, how would it be decided who would go? In an ideal world, this would be the wasters but finding enough of them to meet the butcher's bill wouldn't be easy.

Something like this maybe?

• Step 1: Identify current Actual Service Levels.
• Step 2: Make Every AO, SAO, EO & SEO + graded person list their duties and responsibilities.
• Step 3: Make every person in every department that is deemed administrative re-apply for their jobs.
• Step 5: Make every person in every department that is deemed administrative at ALL levels clock in and clock out.
• Step 6: Review stepped data to identify manning levels, duplication / role overlap and activity cover
• Step 7: Send a percentage of staff at each level home for 2 weeks paid leave and monitor each departments SLA drop.
• Step 8: Review data obtained from step 6, identifying where reductions were required and as it comes to it, increases in staff.

Coupled with a SWOT, LEAN and PEST analysis, should go a long way towards working out who is doing what.